Find weighted average cost of capital - dividends, Corporate Finance

Duke Power Corporation has $500 million (face value) of zero-coupon bonds, which will provide 6% return to the bondholders and will mature after 10 years. The stockholders of the company expect a growth rate of 3% in dividends, and a dividend of $3.00 next year. With 30 million shares of common stock outstanding, it is currently selling for $50 a share. Duke Power has a tax rate of 35%. Find its WACC.

Answer: 8.20%

Posted Date: 3/8/2013 5:08:05 AM | Location : United States

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